How bid protests are slowing down procurements

Jul. 21, 2013 - 06:00AM
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Frank Baitman, Health and Human Services Department chief information officer, said bid protests are one reason procurements may take up to four years. (Colin Kelly / Staff)

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The Navy announced June 27 it was awarding Hewlett Packard a potential five-year, $3.5 billion contract to develop a computer network to serve up to 800,000 Navy and Marine Corps personnel.

Three weeks later, the inevitable happened: The losing party, a team of Harris Corp. and Computer Sciences Corp., filed a protest, potentially delaying the contract award by more than three months.

This came as no surprise to Sean Stackley, assistant secretary of the Navy for research, development and acquisition.

“There is no defense against a protest, but there is absolutely preparation to ensure that in the event of a protest that the government prevail, and we took every measured step to do that,” Stackley said.

Last year, losing bidders deluged the Government Accountability Office with 2,475 bid protests — a 50 percent increase since 2008. And although GAO upholds only a small number of bid protests, they still have a big impact. They have become so common that agencies expect them, build them into their contracting timelines, and regularly train their procurement staffs on how to minimize them, according to agency officials and outside experts.

“We build time in our procurement now for protests. We know we are going to get protested,” said Mary Davie, assistant commissioner of the Office of Integrated Technology Services at the General Services Administration, at a July 11 conference.

Frank Baitman, chief information officer at the Health and Human Services Department, said contracting throughout the federal government is broken and bid protests are one reason procurements may take up to four years.

“We go into large procurements knowing we are going to be protested,” Baitman said.

Michael Fischetti, executive director for the National Contract Management Association, said the sequester is helping to fuel bid protests, but the reasons behind each protest vary. Some are the result of companies not feeling that the debriefing process was fair or that they received adequate information.

“So the debriefing process is very effective, and if you conduct that effectively, they may walk away saying, ‘We lost fair and square,’ ” Fischetti said.

Nevertheless, with fewer contracting dollars being spent because of the sequester, some companies are almost certain to file a bid protest — particularly if the vendor is an incumbent seeking to prolong the contract.

“They may not really know what they’re protesting,” Fischetti said. “But they’ll throw everything against the wall, and during the discovery process they may find something. I think that’s just human nature.”

Its not just the Navy’s $3.5 billion contract that has drawn recent bid protests. The GAO ruled last month that the CIA should reopen negotiations on a $600 million cloud computing contract with Amazon Web Services after IBM protested. And competitors of technology firm Strong Castle Inc. protested hundreds of millions of dollars in IRS blanket purchase awards to the company, saying company officials misled the Small Business Administration into giving the firm status to receive set-aside contracts. While GAO upheld the awards, the IRS decided to cut ties with the company after a House investigation into contract steering.

Joe Jordan, administrator for federal procurement policy at the Office of Management and Budget, said bid protests are an important part of the acquisition process, but too many of them can gum up the process.

OMB encourages agencies to explain clearly to companies why they lost a competition and why an award went to a particular company. By sharing more information, agencies can reduce bid protests, Jordan said.

But in many cases, bid protests are used by companies to force concessions from agencies or the winning companies.

During a bid protest, companies and agencies often strike some sort of settlement, said Ralph White, managing associate general counsel for procurement law at GAO. Last fiscal year, GAO upheld 106 bid protests while 941 were settled between the agency and the company without a GAO decision.

“A lot of the time they are able to work it out without GAO making a decision,” he said.

Peter McDonald, director of the government contracting practice at BDO USA LLP, said some bid protests are settled privately in talks that take place outside the view of federal agencies and GAO.

“Companies themselves can huddle together and make a deal,” he said. “Instead of one contractor getting all of the work, they share the award with a competitor in return for having a bid protest dropped.”

But companies also deal with the costs of bid protests, which Booz Allen Hamilton cited as a “risk factor” in a recent regulatory filing.

“The current competitive environment has resulted in an increase in the number of bid protests from unsuccessful bidders on new program awards,” the company told investors in a May 23 Securities and Exchange Commission disclosure. “It can take many months for the relevant U.S. government agency to resolve protests by one or more of our competitors of contract awards we receive. Bid protests may result in significant expense to us, contract modification or loss of an awarded contract as a result of the award being overturned.”

GSA Administrator Dan Tangherlini said the agency is working to minimize bid protests by reviewing its contracting process and identifying opportunities to train employees on comprehensive contracting requirements.

GSA also has lengthened its lead time on certain contracts to make sure the agency has done its due diligence but balances that with keeping up a timely contracting process.

“Our job is to try and get the best possible vehicle out there and then see what vendors choose to do afterward,” Tangherlini said.